India going digital, paper clearing at banks falls

With GST, cash transactions have come down and been replaced by cheques or demand drafts. However, given the fact that digital transactions are growing phenomenallySaloni Shukla | ET Bureau | October 03, 2017, 11:51 IST

The Reserve Bank of India data shows the value of paper-clearing transactions fell a fifth from Rs 100 lakh crore in 201213 to Rs 80.9 lakh crore at the end of 2016-17. In the same period, the volume of such transactions fell to 120.6 crore from 131.3 crore.

Between 2016 and 2017, the volume of cheque transactions fell by over 11 crore. Paper clearing transactions, which accounted for 82 per cent value of total retail payments in 2011-12, shrunk to 37 per cent in 2016-17.

"Paper-clearing transactions have gone down because other modes like NEFT, RTGS, IMPS have climbed up significantly ," said Mrityunjay Mahapatra, DMD, State Bank of India.

Paper clearing consists of cheque truncation system, MICR (Magnetic Ink Character Recognition) clearing and nonMICR clearing. The RBI data shows that even before demonetisation, digital transactions had been gradually replacing cheque-based transactions. "We have seen demand for cheque payments going up, especially in the SME sector.

With GST, cash transactions have come down and been replaced by cheques or demand drafts. However, given the fact that digital transactions are growing phenomenally , cheques as a payment method would gradually come down over a period of time," said Virat Diwanji, head­ branch banking and acquisition, Kotak Mahindra Bank.

Provisional payments volume data for August shows more Indians used plastic currency or wire transfers, with a steady rise in digital transactions over the past three months. At 883 million, August led July and June that logged 860 million and 844 million transactions, respectively, central bank data showed.

This is the closest to 893 million transactions in March, a record since demonetisation on November 2016.

Leading the pack was Unified Payments Interface (UPI), which the central bank and the government are pushing to drive retail digital payments. UPI clocked 16.6 million transactions in August against 11.4 million the previous month. The 45 per cent month-on-month increase is the highest so far for UPI since demonetisation.

Besides UPI, the growth has been sustained by card swipes at point of sales terminals for merchant payments.